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KEC International - Annual Report Analysis - Healthy outlook across business segment - Accumulate

Posted On: 2022-06-29 21:33:42 (Time Zone: IST)


Mr. Amit Anwani - Research Analyst at Prabhudas Lilladher Pvt. Ltd.

KEC International's (KEC) FY22 annual report analysis suggests that Non Transmission and Distribution (T&D) segments likely to be key growth driver going forward, specially driven by Civil and Railway segments, while T&D segment will be driven by international orders. Within T&D segment, KEC strengthened its position in India, SAARC, UAE, Saudi Arabia etc. with healthy order inflows. Railways segment has deepened its presence in technology-enabled areas of Urban Infrastructure with new orders in metro electrification, overhead electrification, third rail, power supply systems and track laying. Civil segment forayed into the public spaces segment with maiden orders to construct an airport and a high court complex. Cables continued its focus on new product development and has commercialized new cables for railways and large private utility. It has accelerated Oil & Gas (O&G) business by acquisition of Spur Infrastructure Pvt. Ltd.

We believe government spending on infrastructure will continue, thereby translating into healthy ordering activity across sectors such as transmission & distribution, railways, metros, water infrastructure etc. KEC is well placed to capitalize on this opportunity given 1) its presence across various business verticals, 2) strong OB position, 3) healthy execution track record and 4) strong management capability. The stock is currently trading at PE of 18.5x/12x FY23/24E. We maintain 'Accumulate' rating on stock with TP of Rs 451 (same as earlier) valuing it at PE of 13x FY24E.

Transmission and Distribution; International T&D drives order inflows: Order inflow came in at Rs74bn (down 6%), while revenue declined by ~10% to Rs69bn in FY22. Strengthened its presence in India with large orders of ~Rs15bn from PGCIL (under Tariff Based Competitive Bidding), private players and state utilities, including Green Energy Corridor projects.

Railway; Diversification on track: The business continued its growth momentum with revenue growth of 13% YoY to Rs39bn and order inflow growth of 45% YoY to Rs24bn. Delivered 23% of India's railway network electrified in FY22, totaling to 1,441 Route Kilometer (RKM) and commissioned track laying of 131 RKM.

Civil; Key growth driver going forward: This segment has become a key growth driver for the company in short span of time reporting a stellar revenue growth of ~76% YoY to Rs19bn and order inflow came in at Rs58bn. It expanded client portfolio in industrial sector with new orders in chemicals, minerals and FMCG segment. Also delivered 11 high rise residential towers in Bangalore and Pune.

Cables; New product development to drive growth: This segment reported revenue of Rs15.2bn, up 44% YoY in FY22, driven by railway cables (up 100%) and LT cables (up 45%). It exports cables and solutions to 35 countries, including 7 new countries. 40% of export business was contributed by new customers.

Oil and Gas; New growth segment: The segment reported a revenue of Rs1.8bn in FY22 and order inflow of Rs3bn. Successfully integrated operations of Spur Infrastructure into KEC post acquisition. Business is currently executing 20 projects.

Shares of KEC International Limited was last trading in BSE at Rs. 415.05 as compared to the previous close of Rs. 420.95. The total number of shares traded during the day was 30110 in over 1537 trades.

The stock hit an intraday high of Rs. 424.60 and intraday low of 412.00. The net turnover during the day was Rs. 12595486.00.


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